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The Bank Governor at the TUC

Whether or not 'we're all in this together', Mervyn King reminds us we are not all responsible.

For only the second time, a Bank of England governor has addressed the TUC.  Mervyn King gave a short speech before some Q&A.  It was noteworthy not only for the fact that it happened.

No government ministers are at this year's TUC conference.  Such is the anger amongst unions at the job cuts on the horizon planned by the leading disciples of the Cult of Austerity there would have been little meeting of minds.

Mervyn King noted that while the impact of the financial crisis will be wide-felt for years to come, that doesn't mean that we should all share equal responsibility: "Before the crisis, steady growth and high employment was in our grasp.  We let it slip - we, that is, in the financial sectorr and as policy-makers - not your members nor the many businesses and organisations around the country which employ them.  And although the causes of the crisis may have been rooted in the financial sector, the consequences are affecting everyone, and will continue to do so for years to come."

And King also outlined an economic philosophy in which all should benefit from growth:
"To my mind, a market economy and its disciplines offer the best way of raising living standards.  But a market economy cannot survive on incentives alone.  It must align those incentives to the common good.  It must command support among the vast majority who do not receive the large rewards that accrue to the successful and lucky.  And it must show a sense of fairness if its efficiency is to yield fruit."

As King pointed out, there was nothing fair about the financial crisis.  He also made a good point that while anger at the banks is legitimate, the energy which comes with such anger needs to be "harnessed to a cool analysis of what happened and why".

King refused to comment on the merits of the Tory/Liberal deficit reduction plans.  He did suggest unions come up with alternative suggestions.  He did make the point that '"vague promises would not have been enough" to assuage markets.  I agree, even though I believe Labour's deficit reduction plans were at the limit of what was possible or desirable economically.  That's why our leadership candidates - and the new leader - need to say with credibility what how the deficit should be reduced, even if they believe it can be reduced over a longer time scale or that spending cuts should not be implemented next year.

Stephen Beer, 15/09/2010

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